ISLAMABAD: The World Bank has asked the Power Division to establish a Project Implementing Unit (PIU) to sort out the day-to-day affairs regarding Private Sector Participation (PSP) in power Distribution Companies, well-informed sources told Business Recorder.
The bank has floated this proposal through a communication with Minister for Power Sardar Awais Leghari, who is overseeing the privatisation process of Discos.
The sources said following the World Bank’s response to the government’s request on June 13, 2024, for the World Bank technical assistance for PSP in the Discos, the bank has acknowledged the government’s commitment and reiterated our readiness to support this agenda.
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“In our response to the government’s request sent on July 01,2024, we referred to the action plan and timetable required for completion of prerequisites; actions necessary for fostering a conducive environment for PSP in Discos. The bank’s response, action plan and the timetable were also communicated to the secretary’s office through email on the same day,” said the bank’s country director.
According to the bank, the action plan is structured in two phases: (i) pre-transaction phase (July-September 2024). This phase is structured around six critical areas: (a) guidelines on PSP in Discos and competitive process;(b) sector financial sustainability addressing critical aspects such as uniform tariffs, DISCO liabilities management, and subsidy payment mechanism;(c) distribution and supply licensing;(d) market development; (e) communication; (f) labour/human resources.
Transaction phase (September 2024-June 2025): This phase will focus on preparing the first set of DISCOs for market involvement, including sector and respective DISCOs due diligence, preparation and launch of the bidding process, and the finalisation of the award.
The World Bank, in premiership with USAID, has mobilised a team of international and local experts to support your team to address the critical areas of the pre-transaction phase. As agreed earlier, the expertise required to prepare the two critical areas (Communication and HR) will be hired directly by the government.
The bank had earlier confirmed that market development of the Electricity Distribution Efficiency Improvement Project (EDEIP) project can be utilized to hire these resources, most likely at a firm level, and the bank will help the government’s team in developing the related Terms of Reference (ToRs). Given the sensitive nature of the latter two areas, the mobilization of this expertise is pressing.
During the transaction phase, most of the work will be conducted by the Financial Advisor (FA), to be hired by the Privatisation Commission (PC). The hiring process is currently underway. Once the advisor is onboard, the World Bank team will be available to discuss further support with the government.
“We understand government has already made the decision on the options for DISCO PSP, which includes full privatisation for six DISCOs and long-term concessions for three of them.
As such, it is expected that the entire process will be implemented in phases,“ the World Bank country director said, adding that in discussions with the Power Division and Privatisation Commission, the Bank understands their preference to engage FA for the first phase only as opposed to the entire programme. This approach would improve the speed and efficiency of the subsequent phases. For instance, the first phase will include sector due diligence, together with the preparation of bidding documents for the first set of Discos, that could be adapted to the subsequent phases.
The bank is of the view that while typically the assessment of Discos for the first phase, is done by the FA, to expedite delivery, we understand the Government would prefer to make a predetermined selection of Discos as part of the RFP for FA.
When making this decision, various guiding principles can assist decision-makers with the selection of the first set of Discos.
Copyright Business Recorder, 2024
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